Today, particularly with the expansion of communication means and the Internet, conducting transactions for all types of property has become increasingly easy. There exists many on-line sites wherein a Web host serves to facilitate or broker transactions (e.g., Web auction or reverse auction sites). Meanwhile, traditional means of conducting transactions remain intact. As an example, in today's real estate market, the manner of brokering, marketing, financing and selling real estate is very well established. Whether the real estate is residential or commercial, the approach is similar. That is, real estate brokers and agents (collectively “brokers”) spend a great deal of resources, perhaps as much of 70% of their time, in soliciting potential clients (i.e., property owners) for the opportunity to broker the sale of a subject property (or properties). When the client is ready to sell, the vast majority of clients contract with one (if exclusive) or more real estate brokers to find a buyer and facilitate the transaction. Only a small percentage of property owners sell without a broker, perhaps about 16%. Similarly, mortgage brokers spend a great deal of resources attracting business, but in their case the clients are buyers.
Typically, the client (e.g., a seller) and real estate broker enter into a contract (or brokerage/agency contract) setting out the terms of the representation by the broker/agent, e.g., a broker's commission, a term of representation and exclusivity, if appropriate. The broker usually lists the property, conducts open houses, shows the property by appointment, and assists the client in preparing for the closing, which is where the actual sale and transfer from seller to buyer occurs. In the case of a mortgage broker, the client (e.g., buyer) files a loan application and the mortgage broker facilitates the processing of the mortgage loan in preparation for the closing.
The real estate transaction market is quite large. As an example, data shows that about 5.9 million single family residences were sold in the United States (US) in the year 1999, including about 5.2 million single family homes and 681,000 condos and co-ops. About 800,000 of these were new homes. At the same time, out of a total about 103 million residences in the US, about 71.5 million were single family homes. Including single family homes, multi-family homes, and mobile homes, about 68.8 million of the about 103 million residences were owner occupied. At this same time, as an average, residences turned over about every 12 years, although properties having different demographics turn over at different rates.
In the year 2002, about 5.3 million existing homes are expected to be sold. The median price for January 2002 was about $151,000. Assuming this price throughout the year 2002, real estate transactions will total about $796.3 billion in the US in 2002. About 870,000 new homes are expected to be sold at a median price (in January 2002) of about $226,100, yielding about $196.7 billion in transactions. Therefore, a total of about $993 billion in residential real estate transactions in the US for 2002 is expected. About $834 billion of the $993 billion is estimated to be sold through brokers, yielding a total commission across all brokers of about $41.7 billion, assuming a commission of 5%. Therefore, each one percent of market share for a broker is worth about $417 million dollars annually (in 2002 dollars and projections in the US).
Historically, the trend is for these numbers to increase over time. For instance, about 1.1-1.2 million new households are formed each year It has been estimated that 7.6 million people between the ages or 25 and 34 and 6.7 million people ages 35 to 44 will represent the greatest growth in home ownership through the year 2010 in the US. Home ownership, currently at 66%, is expected to surpass 70% by 2010. While such increases provide more opportunity generally, the reality is that the real estate market, like the economy, tends to be cyclical, not linear. So lulls will be experienced. This general trend of growth and the economic magnitude of the real estate market also draws new players into the market, thereby increasing competition. Therefore, a forecast of general growth does not necessarily equate to stability, security, or predictability for individual brokers or firms. Therefor, the ability to secure future business or to at least establish an association with or stake in future transactions would be beneficial to brokers, but no such ability currently exists.
These issues of market cycles, inability to secure a stake in future transactions (or a market share), and high competitiveness are not limited to real property. The brokering of other forms of property, or services related thereto, can be subject to the same types of challenges. For example, in the case of other types of valuable property, brokers of various types tend to play a role in facilitating transactions and securing financing. Such types of high value property may include art, businesses, race horses, boats, planes, cars, financial instruments or investment opportunities, streams of income, memorabilia, antiques, jewelry, and so on.
The traditional model of property brokering requires a majority of the broker's resources and time to be dedicated to getting listings in the present. However, there has been no significant emphasis on generating and securing a broker's future interest in brokering property or in providing services related to a property. Similarly, for mortgage and loan brokers, there is no present approach to securing an interest in future financing or refinancing opportunities.
Given the monetary magnitude of annual real estate transactions and the predictable increase in real estate values, securing an interest in future real estate transactions could be extremely beneficial for brokers. Similarly, securing a future interest in transactions related to other valuable properties would be beneficial.